District Court rules apps’ terms of service hyperlinks were clear and conspicuous

Courts Arbitration Class Action Consumer Finance Mobile Payments EFTA State Issues New York

On February 23, the U.S. District Court for the Eastern District of New York ruled that parties must arbitrate class claims concerning alleged fraudulent transactions on app users’ accounts. Plaintiffs—users of the defendants’ mobile payment platform who claimed that third parties fraudulently withdrew funds from their app accounts—alleged that the defendants’ inadequate dispute resolution process “improperly places the burden on the user to prove that a disputed transaction was unauthorized” in violation of the EFTA and N.Y. Gen. Bus. Law § 349. Defendants, however, countered that the plaintiffs agreed to arbitrate any disputes related to their app accounts, and moved to compel arbitration and dismiss the complaint. The court analyzed the applicable sign-up flows and ruled that in signing up for the apps, users agreed to unambiguous terms of service, which included an arbitration agreement presented in a clickable hyperlinked URL. The court rejected plaintiffs’ assertion that a reasonably prudent smartphone user would not think to click on the terms of service hyperlink, stating that the hyperlink for both apps provided reasonably clear and conspicuous interfaces. The court further found that the claims were subject to arbitration because plaintiffs’ specifically assented to the arbitration provisions and that the parties’ agreed to present any question of arbitrability to an arbitrator.